From Syria and Iraq and now the conflict in Yemen, Sunni Arab states led by Saudi Arabia have vied with Shiite Iran for influence in the Gulf and the greater Middle East.
The rhetoric has risen in recent days, with Iran saying a Saudi-led intervention against Shiite Huthi rebels in Yemen is "dangerous" and could spark a wider conflict.
But unlike other members of the Saudi-dominated Gulf Cooperation Council (GCC), Oman has not joined the air strikes in Yemen.
"Given the political sensitivities and the wide gap over regional security issues, any improvement of ties can function as a confidence-boosting measure that can help to overcome years of mistrust between the GCC states and Iran," said Kristian Coates Ulrichsen, Middle East Fellow at Houston-based Rice University.
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Friendlier ties with Iran, he said, could even open up new economic opportunities for Gulf Arab states.
Oman's unique role was highlighted last November when it hosted Iran, the European Union and the United States for talks on its nuclear programme.
Oman also mediated between Tehran and Washington for prisoner releases, including the freeing of three US hikers jailed in Iran on suspicion of being spies after they strayed across the border in 2009.
Tehran's ambassador to Muscat, Ali Akbar Sibeveih, said trade had rocketed in the past two years from USD 198 million to USD 1.05 billion.
Oman and Iran agreed last year to build an underwater pipeline to pump Iranian gas to the Omani port city of Sohar. Half of the 10 million cubic metres of gas pumped each year will go to Japan, India and South Korea, Sibeveih said.